The Securities and Exchange Board of India on Tuesday released a consultation paper proposing the introduction of gift cards or prepaid payment instruments for investing in mutual funds, following a proposal from the Association of Mutual Funds in India.
Under the proposal, a person would be allowed to purchase a prepaid gift card through banking channels and gift it to another individual, who can then use the card to invest in mutual fund schemes. SEBI said the move is aimed at improving financial inclusion by onboarding new and first‑time investors into the mutual fund ecosystem.
The proposed framework draws on existing regulations issued by the Reserve Bank of India for prepaid payment instruments and SEBI's rules governing investments through e‑wallets. The gift cards would be governed by RBI guidelines, while the actual mutual fund investment would fall under SEBI regulations.
As per RBI rules, the value of a single gift prepaid instrument would be capped at Rs 10,000 and would not be reloadable. Cash withdrawal or transfer would not be permitted, and the full value of the gift card would have to be used for investment. SEBI has proposed that total investments through gift cards, e‑wallets and cash should remain capped at Rs 50,000 per mutual fund per financial year.
SEBI has also proposed additional safeguards, including mandatory verification to ensure that the person redeeming the gift card is the legal owner of the instrument. Mutual fund registrars would conduct third‑party validation checks before allowing any transaction.
The regulator has suggested that while the purchaser of the gift card may indicate a preferred mutual fund scheme, the final investment decision would rest with the recipient. Investors would have the option of investing directly or seeking assistance from a distributor.
Gift cards would have a validity period of one year. If unclaimed within this period, the money would be refunded to the purchaser's bank account.
SEBI has invited public comments on the proposal by April 14, 2026, before taking a final call on the framework.
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